OpenAI CEO Sam Altman speaks during the Microsoft Build conference at Microsoft headquarters in Redmond, Washington, on May 21, 2024.
Jason Redmond | AFP | Getty Images
OpenAI has reversed its policies toward secondary stock sales, and will now allow current and former employees to participate equally in annual tender offers, CNBC has learned.
The AI startup has taken a restrictive approach in the past, with rules allowing the company to limit who can participate in stock sales, CNBC reported earlier this month. This has many shareholders concerned about their ability to obtain liquidity for some of the millions of dollars worth of shares they own.
In a document shared last week through OpenAI's equity management software, the company changed its policy, saying: “All vendors (current and former service providers) will have the same sales threshold.” Service providers include employees and consultants, OpenAI said in the document, seen by CNBC.
An OpenAI spokesperson did not immediately respond to a request for comment.
Tender offers have become a particularly sensitive topic recently due to OpenAI's soaring valuation, which followed the launch of ChatGPT in late 2022, and a relatively dormant IPO market for more than two years. With no IPO on the horizon and the price making the company too expensive for potential acquirers, secondary stock sales are the only way in the near future for shareholders to obtain a portion of their paper wealth.
Current and former OpenAI employees previously told CNBC that there is growing concern about access to liquidity following reports that the company has the ability to redeem vested shares. OpenAI, backed by approximately $13 billion from… MicrosoftIts value was estimated at more than $80 billion.
Previous documents indicated that for former employees, secondary sales typically occur months after transactions for current employees. Sales limits can vary greatly. In at least two tender offers, the cap for former employees was $2 million, compared to $10 million for current employees.
The change announced last week included a rollback of a provision that some worried could allow the company to forcibly buy back shares at its sole and absolute discretion to obtain “fair market value.” The earlier documents stated, “The Company may, at any time and in its sole and absolute discretion, redeem (or cause to be sold) the Company’s interest to any assignee for cash equal to the fair market value of such interest.”
OpenAI said in the updated document that it “will not enforce any provision in its employee equity documents mandating the redemption of shares at fair market value, and will revise our documents to reflect that.”
The internal document said that former employees who now work for competing companies will no longer be excluded from official tender offers, and will be included in the same category as other former employees.
OpenAI said the only area where current employees would remain higher in line is if a future tender offer is oversubscribed, meaning stakeholders want to sell more shares than investors have agreed to buy. In this case, OpenAI said, “we will prioritize giving liquidity to existing providers over previous providers,” leading to a potential “downgrade” for those no longer with the company.
By reversing its bidding and proposal policies, OpenAI has taken another step to allay employee concerns. Following reports of potential redemptions, OpenAI recently distributed a document, obtained by CNBC, titled “Overview and Summary of OpenAI's Bidding Process,” which details how the company has made stock purchases in the past and how it plans to handle them in the future.
Last month, OpenAI announced that it would reverse a controversial decision to make former employees choose between signing a non-disparagement agreement that would never expire or keeping their vested shares in the company.
However, one notable issue regarding employee rights was not addressed in the recent change. In the past, OpenAI has opened “donation rounds” for existing employees, allowing them to donate a certain amount of their vested shares to charity, which brings with it tax incentives. Former employees could be excluded, as donation rounds will likely be offered “only to active employees and is not guaranteed to happen,” according to letters seen by CNBC earlier this month. The new document did not clarify whether the policy was still in effect.
